Buy And Hold: Gold's Broken Strategy

The Power of the Pattern suggested on 9/1/2011 -- when gold was trading at $1,828 -- that gold could trade flat to down for years to come. (see the September 2011 post here).

The top chart reflected that, for 30-years, each time the Swiss Franc hit resistance line (1), gold traded flat-to-down for years, reflected by the red arrows in the bottom chart. As you can see by the comments received in that post, many investors said 'No Way' that could happen.

Keep in mind this situation was taking place at the same time GLD became the largest ETF on the planet. (see GLD largest ETF/Eiffel tower pattern).

The S&P 500 ETF (SPY) became the largest ETF in the world back in 2000 after a 10-year rally, was that a good time to "Buy and Hold" SPY? Buy and Hold didn't work too well -- because 13-years later, SPY was at the same price point. If you traded SPY with a simple 200-day moving average as your buy/sell trigger, you far outpaced buying and holding SPY.

Reformed Broker shared this chart to readers back in February (see post here).

GLD became the largest ETF on the planet in August of 2011, when gold was trading at $1,900 per ounce, at its Fibonacci 261% extension level and at the top of its 10-year rising channel. Not a bad time to hedge or harvest long gold holdings. Once GLD became so big, was that signal to start renting/trading gold versus buying and holding it? So far renting has worked out better than owning.

Many said 'NO WAY' could gold trade flat to down for years to come back at the highs of the summer of 2011. I suspect many still say the same thing even now. The Power of the Pattern was suggesting to rent Gold back then, and a break of support -- line (1) in the above chart -- would bring about selling pressure in Gold and continue to suggest the need to rent the metal versus to own it for a while.

I believe the need to have a system to trade/rent gold is so important right now, we will be starting a new research report in the very near future to help short, medium and long-term investors in the metals complex. We have levels established where the Power of the Pattern suggests backing the truck up and buying a large amount of gold.

If you'd like to see the target we shared with members several weeks ago for Gold, send us an email to services@kimblechartingsolutions.com and in the subject line put "Gold Target".